Cato: One Ring to Replace Them All

Shlomo Kramer, one of the most successful serial entrepreneurs and investors in the cybersecurity industry, keeps naming his companies using vocabulary from ancient Rome. He founded Imperva (“impenetrable” in Latin, as were the roman legions during battles) and sprinted it straight to an IPO.

Now he has Cato, an ambitious startup that has already raised $50M dollars, $30M of them earlier this week in a financing round led by Greylock Partners with participation from existing investors Singtel Innov8, USVP, Aspect Ventures and the company’s own founders, Shlomo Kramer and Gut Shatz.

Until the company’s $20M A round less than a year ago, they were self-funded by co-founders Shatz and Kramer. Now with $50M in his pocket raised just for Cato within less than a year we should hail Caesar Kramer.

Procius Cato from HBO’s TV series Rome

Cato Networks, founded in January 2015, hopes to offer simplified network security software. The company’s products aim to meet the challenge of containing and managing network perimeters caused by the cloud infrastructure, Internet of Things, and mobility. In order to provide security for businesses with data on different devices, in different locations, as well as in the Cloud, Cato ties all of the client’s data into Cato points of presence over encrypted links.

The Cato cloud is connected to the general internet, while traffic from the internet is run through Cato’s security before being delivered to customers. It actually uses the cloud to consolidate WAN and internet traffic and then offer enterprise security products on top, such as VPN, anti-virus, firewall, or sandbox. We call that: one ring of cloud to rule them all!

The Cato Cloud is a global network of what they call “points of presence” (PoPs), data centers located in Israel (where the company originated from), Amsterdam, Virginia, Hong Kong, and Singapore, with more being created and a goal of 30-35 eventual sites around the world. Users then securely connect to their cloud from anywhere using a VPN tunnel, and are automatically connected to the closest PoP. The company served mainly Israeli and Europeans customers and now are building their US presence in full power and extra cash.

The worldwide public cloud services market is projected to reach $204 billion in 2016, up from $175 billion in 2015, according to IT industry analyst firm Gartner. Shlomo Kramer, who ultimately co-founded Check Point and Imperva, and sold portfolio companies like Trusteer and Watchdox to IBM and Blackberry for hundreds of millions of dollars, is probably the right man to to the job. Kramer reported full speed adoption of the VPN product and tells the media that the investors are sure that Cato and its attitude towards network security as a service on the cloud is the future of network security.

We at Zirra used our own proprietary technology and our network of experts to rate the company’s momentum (see above) at 9.7 out of 10 and the team at 9.2, highly rated in comparison to most other players in the industry.

In addition, we estimate Cato’s valuation to be around $350M-$400M post money. The estimated exit for the company, based on today’s metrics is valued at $700M-$800M with a 20%-30% chance of exit. We estimated the possible exit window of opportunity for the company at 4-5 years.

There are still a few questions that should be answered over time. The first is that Cato requires CIOs to renounce eventually all the existing security products that are already integrated into their systems. This might create not only a risk of putting all your eggs in one basket, but a political crisis with all your former security vendors: Check Point, Palo Alto Networks, F5, Fireye etc.

Cato will offer only a gradual transformation from its older competitors and launched so far only limited services such as VPN and MPLS over the cloud. Besides, Cato is promising to save quite a lot of money since there’s no longer a need to work with many vendors. Just wear the one ring and spare your cyber dollars.

In addition, it is not quite clear how Cato will convince governmental, security, finance and medical giants to fully hand over their security management to the public cloud. It’s quite possible that Cato is not even trying to hunt them, but is pursuing more medium sized players such as tech firms that need to connect the many mobile devices of their employees scattered around the globe, a growing base of customers, complex data bases and the cloud.

Shlomo Kramer not only revolutionizes the cybersecurity industry and puts it as a service on the cloud, he also starts a world war between Cato and the entire industry, including Check Point, the firewall company he helped found. Are we going to witness a Roman style battle in the Mediterranean sea of cybercsecurity?

Cato the Elder used to conclude each of his speeches on any topic whatsoever with the cry, “Moreover, I advise that Carthage must be destroyed”. It is quite possible to think that Kramer brings with him the same spirit of fight to the cyber world.